Report: Social Security overpaid disability benefits by $17 billion

An employee of the Korea Exchange Bank counts money next to stacks of one hundred U.S. dollar banknotes at the bank's headquarters in Seoul, August 11, 2011. REUTERS/Jo Yong-Hak WASHINGTON (AP) — Social Security overpaid disability beneficiaries by nearly $17 billion over the past decade, a government watchdog said Friday, raising alarms about the massive program just as it approaches the brink of insolvency.

Many payments went to people who earned too much money to qualify for benefits, or to those no longer disabled. Payments also went to people who had died or were in prison.

In all, nearly half of the 9 million people receiving disability payments were overpaid, according to the results of a 10-year study by the Social Security Administration's inspector general.

Social Security was able to recoup about $8.1 billion, but it often took years to get the money back, the study said.

"Every dollar misallocated is a dollar lost for those who truly need it most," said Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee. "Today's report shows the inability of the Social Security Administration to properly safeguard payments, which has no doubt contributed to speeding the fund toward exhaustion."

The trust fund that supports Social Security's disability program is projected to run out of money late next year, triggering automatic benefit cuts, unless Congress acts. The looming deadline has lawmakers feuding over a solution that may have to come in the heat of a presidential election.

The program's financial problems go beyond the issue of overpayments — Social Security disability has paid out more in benefits than it has collected in payroll taxes every year for the past decade. But concerns about waste, fraud and abuse are complicating the debate in Congress over how to address the program's larger financial problems.

A sign for the Social Security Administration is seen in Los Angeles, Friday, July 29, 2011. AP Photo/Matt Sayles A spokesman for the Social Security Administration said the agency has a high accuracy rate for its payments and a comprehensive debt collection program for overpayments.

"Social Security provides services to over 48 million retirement and survivors beneficiaries and about 15 million disability beneficiaries," Social Security spokesman Mark Hinkle said in an email.

"The agency will issue nearly $1 trillion in payments this year.

For fiscal year 2013 — the last year for which we have complete data — approximately 99.8 percent of all Social Security payments were free of overpayment, and nearly 99.9 percent were free of underpayment."

"That same year, we also achieved high levels of payment accuracy in the (Supplemental Security Income) program despite the inherent complexities in calculating monthly payments due to beneficiaries' income and resource fluctuations and changes in living arrangements," Hinkle said.

The inspector general's office examined a randomly selected sample of 1,532 people who were receiving either Social Security disability or Supplemental Security Income in October 2003. SSI is a separately-funded disability program for the poor.

Auditors followed the group for 10 years, until February 2014. They determined that 45 percent of the beneficiaries were overpaid at some point during that period. The overpayments totaled $2.9 million, the study said.

They used the results to estimate that Social Security made a total of $16.8 billion in overpayments during the 10-year period.

The study concluded that "the agency could do more to prevent the most common overpayments."

One man was convicted of fraud in 2005 while he was getting benefits under his father's Social Security number. Minors can do this if they have legitimate disabilities, though this man was found to be working and hiding his income, the study said.

A judge ordered him to repay nearly $18,000. He repaid $550, the study said.

In 2013, Social Security approved a new disability claim for the man, under his Social Security number. The agency is supposed to withhold part of his payments while he repays the old debt. But the agency never did because he was receiving the new benefits under a different Social Security number, the report said.

Congress has been looking into Social Security's disability programs for years. Democrats note that the programs help keep millions of disabled workers and their families out of poverty. Republicans have mostly focused on waste, fraud and abuse.

Republican presidential candidate U.S. Senator Rand Paul (R-KY) speaks at the First in the Nation Republican Leadership Conference in Nashua, New Hampshire April 18, 2015. Reuters In January, Sen. Rand Paul, R-Ky., criticized the federal government for not doing an adequate job policing a system he says needs reform.

Paul, who is running for the Republican nomination for president, joked that "half the people on disability are either anxious or their back hurts."

"Join the club," Paul said. "Everybody over 40 has a back pain."

Advocacy groups called the remarks offensive.

Social Security paid out $142 billion in disability benefits last year. Unless Congress acts, the trust fund that supports the disability program will run dry sometime during the final three months of 2016, according to projections by the trustees who oversee Social Security. At that point, the program will collect only enough payroll taxes to pay 81 percent of benefits.

That would trigger an automatic 19 percent cut in benefit payments. The average monthly payment for a disabled worker is $1,165, or about $14,000 a year.

An easy fix is available. Congress could redirect payroll tax revenue from Social Security's much larger retirement program, as lawmakers have done before. But Republicans in Congress are balking, saying they want to address the program's long-term finances.

About 11 million disabled workers, children and spouses currently receive Social Security disability benefits. About 8.3 million people receive Supplemental Security Income, which is funded separately, through the government's general revenues.